CBS News investigation alleges Cockerell Dermatopathology used service members to bill military health insurance system for millions of dollars of unnecessary screening tests
Following its investigation, CBS News reported allegations that a Texas dermatopathology laboratory has bilked the military healthcare system out of millions of dollars by enticing service members to sign up for unnecessary genetic and drug screening tests in exchange for $50 gift cards.
This latest incident adds to the growing number of investigations and health insurer lawsuits in recent years alleging fraudulent business practices within the clinical laboratory industry. Although only a handful of companies have been prosecuted by the federal government for fraud and abuse, The Dark Report last year noted that the hundreds of millions of dollars involved in these cases represent just a portion of the fraudulent clinical laboratory test claims that federal officials believe have been submitted in recent years by a much larger number of lab companies performing toxicology, pain management, and cardiology tests.
Clinical Laboratory Allegedly Committed Insurance Fraud According to CBS News
In its June 8, 2016, broadcast, CBS News exposed this latest alleged insurance scam involving Cockerell Dermatopathology Laboratory in Dallas. CBS News claims soldiers and their family members were drawn to makeshift clinics near Fort Hood Army base in Texas by a marketing campaign that offered a $50 Walmart gift card in exchange for providing DNA, a urine sample, and a copy of their military identification card. CBS said screening tests were then conducted and billed to Tricare, the health insurance program for military members, retirees, and their family members.
Linda Bozeman, wife of a service member, stated in the CBS News report that she visited a Fort Hood area clinic several times last year to earn extra money during the Christmas holiday season.
“They said they had this clinical research going and that they paid you by Walmart cards, so you’d give your urine,” said Bozeman, whose photocopied ID card was found by CBS News in a shed filled with discarded DNA specimens, medical information, Social Security numbers, and other paperwork.
CBS News reported that Cockerell Dermatopathology used Bozeman’s samples to bill Tricare 418 separate times for unneeded screenings for dozens of drugs such as PCP, cocaine, and methadone at a cost of nearly $7,000.
Accused Lab Received Millions in Payments from Tricare
According to CBS News, Cockerell Dermatopathology received more than $5 million in Tricare payments last year for allegedly unnecessary lab tests performed by Origen Laboratories in Dallas. The lab conducts molecular, genomics, and toxicology testing for Cockerell Dermatopathology, and also is owned by Clay Cockerell, MD, who is past President of the American Academy of Dermatology. Origen Laboratories is managed by ProGen Lab Systems, an independent laboratory management organization.
Retired 2-star General Richard Thomas (left), former head of Tricare, speaks with Jim Axelrod (right) of CBS News, about the investigation into Cockerell Dermatopathology of Dallas. The investigation was sparked by a CBS News story that alleged the clinical laboratory was part of a scheme to entice service members near Fort Hood Texas to provide DNA and urine samples that were used to bill the military health insurance system for millions of dollars of unnecessary genetic and drug screening tests. (Photo copyright: CBS News.)
During a briefing with reporters that took place the day after the CBS News report aired, Pentagon Press Secretary Peter Cook did not confirm a Pentagon investigation was under way to determine who made money at Tricare’s expense, but noted, “Reports like this are obviously of concern to us and something we want to address.”
Cockerell Lab Responds to Allegations of Wrongdoing
An estimated 2,000 soldiers may have been duped, CBS News stated in its report.
In response to the CBS broadcast, Cockerell Dermatopathology posted a statement on its website in which the lab stated it would be refunding money received from the tests in question, which was reported by Military.com. The clinical laboratory company did not provide details on the amount being refunded or indicate who would receive reimbursements. Cockerell Dermatopathology stated that the lab would “vigorously defend [itself] against allegations of wrongdoing.”
“When Origen became aware that certain individuals were operating outside of the organization’s strict compliance requirements regarding the manner in which laboratory services are marketed, we took immediate action, including terminating individuals and relationships with those that acted in violation of the laboratory’s compliance policies,” Cockerell Dermatopathology wrote in that statement. “We are also voluntarily refunding monies resulting from these activities. In no case did Origen or Cockerell profit from these activities as suggested by the CBS story.”
The original statement is no longer available to be read on the Cockerell Dermatopathology website. However, in a “Clarification of Facts,” statement posted on July 11, Cockerell admitted to having a “relationship” with Origen Laboratories, which is managed by ProGen. He also claims that “months prior to the airing of the CBS story” ProGen learned of “individuals operating outside of the company’s compliance policies and requirements” and immediately terminated those individuals.
In July, following the CBS broadcast, Baylor University Medical Center announced that Alan Menter, MD, would remain as the university’s Chairman of Dermatology indefinitely. According to Dallas/Fort Worth Healthcare Daily, Clay Cockerell had been scheduled to take over Menter’s post on July 1. In a statement, Baylor praised Cockerell, stating, “Dr. Clay Cockerell is a well-regarded dermatologist who has an excellent clinical reputation. We were previously in discussions with Dr. Cockerell about a leadership position at Baylor University Medical Center. However, both parties have formally paused the talks.”
The article also reported that, in an e-mail, Cockerell stated, “While I work to correct the misinformation in the story, we thought it best to delay my appointment temporarily and mutually agreed to a short term pause.” Cockerell also wrote, “I do not own a lab in Killeen. The lab that is managed by ProGen performed tests on specimens that were sent to us that were induced by dishonest individuals. We learned about it over nine months ago. ProGen terminated relationships with all individuals involved, notified the payer, and began voluntarily returning all monies garnered by the tests associated with the scheme.” The amounts of the refunds have not been disclosed, however, CBS News did confirm in its report that an investigation by the federal government has begun.
Tricare is managed by the Defense Health Agency and is divided into three regions in the United States and multiple regions overseas, with each region served by a health insurance contractor. The Tricare South region, which includes Texas, is administered by Humana Military. A Humana media relations manager did not respond to Dark Daily’s request for a response to the CBS News report.
Over the past year, Dark Daily and its sister publication, The Dark Report have been contacted by numerous individuals claiming knowledge of businessmen, often located in Texas, who are organizing clinical enterprises designed to remunerate physicians for clinical laboratory test referrals in ways that would be recognized by experienced medical laboratory professionals as illegal inducements and kickbacks under federal law.
In several cases, these scammers have approached established clinical labs, such as hospital labs, to ask for an agreement wherein the established labs would perform testing on specimens referred by the clinical enterprises being organized by these individuals. Where such agreements have been negotiated, the scammers then use the credibility of their “reference lab” to persuade physicians to send patient lab test samples to their shell companies. Anyone with knowledge of similar arrangements is encouraged to contact the editors of The Dark Report in confidence.
—Andrea Downing Peck
Related Information:
U.S. Military Members Duped to Help Pull Off Insurance Fraud
Feds Investigating Insurance Fraud That Duped U.S. Military Members
In Response to the CBS News Story That Aired on June 8, 2016
Report: Troops Duped in Alleged Tricare Fraud
Baylor Taps the Brakes On Replacing the Chairman of Its Dermatology Program
Lab Testing Scheme Targets Tricare
Baylor Delays Leadership Appointment for Dermatologist Linked to Scam Involving Vets
My son is being threatened by OriGen Labs! They have been sending us bills for almost $600.00 for ,”labwork” done on a visit to the orthopedic for a knee injury in October of 2015. He had X-rays done! No swab or bloodwork done! They will not respond to either of us ! Never an answer on billing line! What can he/we do. He is a struggling college student whose credit is being threatened! We are not military. Please advise!
Thank you!!!
My husband was offered free genetic experimental testing to determine if his medication would actually work for him. We were told that neither we nor our insurance company, BCBS, would be billed. This was on 9/28/15. We are now getting a bill from Origen Laboratories DNA Cockerall Dermatopathology showing they billed BCBS $4,544.68 and they’re now billing us $1,049.65. We are getting the run around from both the Lab and Dr. William Alec Tisdall’s office.
This company also did the same thing to me in Charlotte, NC. My dr offered genetic testing. The lab work was sent to Cockerelle Labs. We have received paperwork that the amount of the testing was $30,000. They charged our insurance company $20,000.
So, on my EOB, this is not you?
Health Care Professional: Cockerell Dermatopathology PA
You Pay
Your Plan Pays
Amount
$19,096.30
Bill received by Aetna on 09/26/2016
$4,153.90
A cheek swab done by my Primary Care doctor that told me it was free?
“We believe the lab behaved in an appropriate and responsible fashion and I certainly did as well. Unfortunately, I have suffered major damage already such as the loss of business as well as other professional opportunities. This has been extremely stressful for my employees, my wife and my children as well.”
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INTERESTING STATEMENT DR. COCKERELL….I am sorry to hear how stressful this has been for you and your family….Many of of us can empathize with the feeling since your lab balance billed many of us $40,000 plus dollars for scam tests that were done. The terror of bankruptcy and elimination of any chance our kids can go to college due to your scheme and your exploitation of patients really drives home that feeling of major damage and loss. And the loss of professional opportunities for our children is extremely stressful for my family too.
Your lab deserves justice to come down hard.
Dear Colleagues,
This is Clay Cockerell, MD and the following is a synopsis of the entire issue alluded to above to the best of my knowledge. This is not a legal document and some of it is still speculative as we do not have all the facts yet.
In addition to my traditional dermpath lab, I have a business relationship with a clinical pathology lab, Origen, that operates in the building where we work and does molecular pathology, genomics and other diagnostic testing that is managed by a third party lab management company. This offered us the opportunity to diversify into molecular pathology which we had been wanting to do for some time. It is a well-run operation that is managed by a completely different organization than my dermpath lab but is in-network because of my CLIA certificate and contracts.
To the best of my knowledge, this is what happened in Killeen, Texas at more than one location. There were individuals who were hired as outside sales reps for Origen responsible for a scheme targeting military individuals, and ultimately Tricare, giving a gift card in exchange for submitting a urine and cheek swab sample for testing. There were physicians involved who either were complicit or may have had their identities stolen. The doctors’ names were used to order the tests which were sent to Dallas. The lab performed the tests with no knowledge that they were ordered in a tainted fashion and billed for the services.
More than 10 months ago, when they became aware that the scheme was going on, the lab operators immediately terminated all relationships with those involved. Tricare was notified and an arrangement was made to pay back revenue generated by the scheme. The lab operated appropriately as it has a fiduciary responsibility to perform tests on samples it receives. I found out about the situation after corrective actions were taken. I was not involved in dealing with the issue as I am not an operator of the lab.
Regarding the CBS news story, a reporter had been doing an investigation on lab testing in general as to whether the testing is always legitimate. We think that when she learned about the previous year’s scheme, the decision was made to go with that story instead.
The reporter appeared in my parking lot in early April with a cameraman and microphone as I was walking to my car to leave. She asked me a series of questions with no opportunity for me to prepare for in advance. Since I hold the CLIA certificate and am therefore affiliated with the lab, I could be linked indirectly with the scheme, and unfortunately, the video they had shot in my parking lot with images of me and our building were shown prominently in the piece.
We believe the lab behaved in an appropriate and responsible fashion and I certainly did as well. Unfortunately, I have suffered major damage already such as the loss of business as well as other professional opportunities. This has been extremely stressful for my employees, my wife and my children as well.
I am outraged and appalled that my good reputation and honest laboratory operations were used in this fashion and we will do everything in our power to see to it that justice is done. I am further appalled that these individuals targeted military personnel and their families. I have been serving veterans as a dermatologist and dermatopathologist via interpreting specimens from the Dallas VA hospital for more than 25 years. I have veterans working for me in my lab operation and have trained a number of veteran medical students, residents and fellows.
We have had many well-wishes from those who know us to be honest. The focus on this issue has diminished dramatically and we hope it continues to do so. We continue to provide the best care we can to our patients and execute on our mission — to provide high-quality, cost-effective diagnostic services that reassure those who require them, anywhere in the world.
Sincerely,
Clay J. Cockerell, M.D.